India: Price pressures jump in July on seasonal effects and GST impact
August 14, 2017
In July, consumer prices jumped 1.67% from the previous month, which followed June’s revised 0.46% rise. July’s spike in prices mostly reflected higher vegetable prices and the impact of the Goods and Services Tax (GST), which came into effect on 1 July. Inflation accelerated to a three-month high of 2.4% in July (June: 1.5%). The reading overshot market expectations of 1.9%. Despite the increase, inflation is still below the Central Bank’s medium-term target of 4.0%.
The wholesale price index (WPI) in July swung to a 1.06% increase from the previous month, which contrasted June’s revised 0.18% fall. Sharp price rises for vegetables stoked the swing, while a fall in the price of pulses tamed it somewhat. Wholesale price inflation gathered pace in July, hitting 1.9%, which was up from 0.9% in June. The trend continued to point upward, with the annual average wholesale inflation rate rising to 2.6% from 2.5% in June.
Author: Edward Gardner, Economist